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Volume XII, Number 279

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Suspension By California Franchise Tax Board

Yesterday’s post concerned the two circumstances in which the Secretary of State might suspend a corporation. The California Franchise Tax Board will suspend a corporation if it fails to pay taxes, penalties, fees or interest (Cal. Rev. & Tax. Code § 23301) or fails to file a return (Cal. Rev. & Tax. Code § 23301.5).

These suspension provisions also apply to a foreign taxpayer if (and only if) it is “qualified to do business” in California. Cal. Rev. & Tax. Code § 23301.6.  The phrase “qualified to do business” in the statute, however, is inapt.  Under the General Corporation Law, a foreign corporation qualifies to “transact intrastate business”.  Cal. Corp. Code § 2105.

The consequences of suspension by the Franchise Tax Board are significant.  According to the Franchise Tax Board, a suspended corporation may not:

  • Legally transact business

  • Bring an action or defend itself in court

  • Receive an automatic extension of time to file

  • File a claim for refund

  • File or maintain an appeal before the Board of Equalization.

  • Begin or continue a protest

  • Legally close or dissolve the business

In addition, a suspended corporation may lose its right to revive under its own name if another corporation appropriates its name during the period of suspension.

In a future post, I’ll discuss how to revive a foreign corporation from suspension by the Franchise Tax Board.

© 2010-2022 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume VI, Number 132
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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
Partner

Keith Bishop works with privately held and publicly traded companies on federal and state corporate and securities transactions, compliance, and governance matters. He is highly-regarded for his in-depth knowledge of the distinctive corporate and regulatory requirements faced by corporations in the state of California.

While many law firms have a great deal of expertise in federal or Delaware corporate law, Keith’s specific focus on California corporate and securities law is uncommon. A former California state regulator of securities and financial institutions, Keith has decades of...

949-851-5428
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